File No. 819.77/261
The Minister of Panama to the Secretary of State
Washington, December 26, 1916.
Mr. Secretary: I have the honor to acknowledge receipt of your excellency’s note No. 7 dated the 22d instant, and in reply beg leave to express my satisfaction at finding therein the Department of State’s opinion of the projected construction of an 18-mile extension of the Chiriqui Railway which will prove of great benefit to the Republic of Panama and at knowing that the Department of State is disposed to approve an issue of 5% bonds by my Government aggregating $400,000 provided that adequate provision be made for the redemption of those bonds within thirty years after the date of issue, that $200,000 of the issue be delivered at not less than 97% of the face value and that the remainder will be delivered, when needed, with the approval of the Government of the United States.
This very important matter will, on this very day, be communicated to the Government of my country for its further action; but, in the meanwhile I will take the liberty of calling to your excellency’s attention two probable errors in which your excellency’s Government seems to me to have fallen in this case. The first is the idea that the railway is to be extended eighteen miles in the direction of Charco Azul from the city of David. I must say to your excellency that the eighteen miles from the city of David in that direction have already been built, that being one of the branches built in Chiriqui with the three previous issues of the loan. The projected extension is to be eighteen miles more or less and in the direction of Charco Azul but not from David; it is from the city of Concepcion which is the terminal of the railway branch under consideration.
[Page 1182]The other probable error is that which deals with the hypothecation required as a security for the issue. Your excellency speaks of the sum of the six millions belonging to the Republic of Panama and invested in mortgages in the city of New York by order of the Panaman Government. Your excellency will remember that my Government negotiated a three million dollar loan with the National City Bank and the Farmers’ Trust Co. of New York City for the construction of railways in the Republic of Panama, giving as security the annuity of two hundred and fifty thousand dollars which your excellency’s Government pays to my country under the Canal Treaty. Of that loan there have been but three issues of seven hundred and fifty thousand dollars, and now it is proposed to make a fourth issue of four hundred thousand only, so that the surety for this last does not bear on the six millions above mentioned, but is the same surety pledged for the loan and the three issues already made which form part of it.
I trust that, if your excellency concurs in this view, you will be so good as to let me know in order that my Government be fully aware of the obligations it is about to assume.
Accept [etc.]